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PERM vs TERM

Which Policy is Right for You?

  Term Permanent
Product
  • Term 10
  • Term 20
  • Variable
  • Universal Life
  • Term 100
  • Whole Life
Uses For temporary needs to cover the dependency period such as paying off your mortgage, saving for your children's education, to protect a business loan, to make provision for replacement income for a spouse or family For permanent needs such as final expenses, to offset probate and legal fees, to cover final taxes and estate duties, to leave a legacy for loves ones or for charity.
Costs Initially very affordable and remains level for the selected term, but escalates at each renewal as one gets older Cost more in early years compared to term policies, but premium remains unchanged as one ages
Coverage Period Renewable every 10 years / 20 years / etc. until age 80, after which the policy terminates Remains in force until it is paid out
Convertibility Can be converted to a permanent policy until a certain age as written in the insurance contract No conversion privileges

Investment Opportunities

(Tax Sheltered)

None Available in Universal Life Policies where policy owner have a selection of investment funds or interest options. More limited in Whole Life policies but over-funding opportunities exists. Any gain is tax deferred, but paid tax-free to a beneficiary if left within policy.
Cash or Surrender Value None Yes - usually very little in the early years, but can grow quite substantially after a while, especially if over-funding is involved.
Collateral for Loan Has no cash value, therefore cannot be used as collateral for a loan. Note: this is not the same as ceding a policy to a lender - in which case you make your lender the beneficiary, should something happens to you, the lender gets the proceeds of the policy to pay off your loan. Can be used as collateral. Banks normally consider up to a certain percentage of the cash value, depending on the quality of the investments within the policy.

Term vs Perm, no one policy is better than the other. It depends on your goals and circumstances. An insurance advisor can help you with your decision and put together a solution that is personalized for you and your family, or your business.

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